The goal of this course is for the students to understand how economic theory can be used to better understand collective decision-making and interactions between economics and politics.

Taxation, expenditure and regulatory policies enacted by the government have significant impact on economic outcomes. Do these policies reflect the preferences of the people of the country? Democratic governments are formed by politicians chosen through an electoral process. How do the motivations of the politicians affect their choice between providing efficient levels of public goods and retaining rents for themselves? Do elections check the rent-seeking activities of the politicians and result in a more competent government? Which electoral rules are more successful in achieving this goal? Different constitutions lay out different procedures for political decision making. What are the effects of different constitutions on policy? Some policies can have a large impact on a small group of people resulting in the formation of special-interest groups who lobby to affect policy in their favour. How does lobbying influence policy?

We study these questions by modelling politics as a game between voters and politicians. Different political institutions are modelled by appropriately defining the rules of the game. Finally, we use game-theoretic equilibrium concepts to analyse the nature and economic implications of this strategic interaction.

Persson, T. and Tabellini (2000). Political economics: Explaining economic policy. Mit press, selected articles.

Knowledge of microeconomics from a master's level course, including game theory concepts such as Nash Equilibrium and subgame perfect equilibrium, is required. The ideas developed in the course are related to the concepts introduced in the course Public Policy Evaluation, though neither of these is a strict prerequisite for the other.